Correlation Between Zegona Communications and Lloyds Banking

Can any of the company-specific risk be diversified away by investing in both Zegona Communications and Lloyds Banking at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Zegona Communications and Lloyds Banking into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Zegona Communications Plc and Lloyds Banking Group, you can compare the effects of market volatilities on Zegona Communications and Lloyds Banking and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Zegona Communications with a short position of Lloyds Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Zegona Communications and Lloyds Banking.

Diversification Opportunities for Zegona Communications and Lloyds Banking

0.49

Correlation Coefficient

Zegona Communications  Lloyds Banking

Very weak diversification

The 3 months correlation between Zegona and Lloyds is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Zegona Communications Plc and Lloyds Banking Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lloyds Banking Group and Zegona Communications is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Zegona Communications Plc are associated (or correlated) with Lloyds Banking. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lloyds Banking Group has no effect on the direction of Zegona Communications i.e., Zegona Communications and Lloyds Banking go up and down completely randomly.

Pair Corralation between Zegona Communications and Lloyds Banking

Assuming the 90 days trading horizon Zegona Communications Plc is expected to generate 1.43 times more return on investment than Lloyds Banking. However, Zegona Communications is 1.43 times more volatile than Lloyds Banking Group. It trades about -0.01 of its potential returns per unit of risk. Lloyds Banking Group is currently generating about -0.05 per unit of risk. If you would invest  33,000  in Zegona Communications Plc on September 14, 2024 and sell it today you would lose (1,000.00) from holding Zegona Communications Plc or give up 3.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Zegona Communications Plc  vs.  Lloyds Banking Group

Zegona Communications Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zegona Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Zegona Communications is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Lloyds Banking Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lloyds Banking Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lloyds Banking is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Zegona Communications and Lloyds Banking

The main advantage of trading using opposite Zegona Communications and Lloyds Banking positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zegona Communications position performs unexpectedly, Lloyds Banking can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Lloyds Banking will offset losses from the drop in Lloyds Banking's long position.

The idea behind Zegona Communications Plc and Lloyds Banking Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.